The Effect of Leverage on Corporate Cash Holdings: Evidence from Indonesian Manufacturing Firms

Abstract

The objective of this research is to test the impact of leverage on corporate cash holdings for sample of manufacturing companies enlisted on the Indonesian Stock Exchange over the period 2006-2007. Population of this research is all of manufacturing companies on the Indonesian Stock Exchange. The sampling method is purposive. The study hypothesis was tested using multiple regressions. The results show that leverage has a negative influence on corporate cash holdings. Indonesian manufacturing firms with high leverage can hold cash in small amounts because debt is a substitute for corporate cash holdings.